Are There Too Many Financial Advisers in Singapore?

Singapore has a population of about five million while the number of practitioners in the financial advisory industry is estimated to be between 20,000 to 30,000. This includes tied insurance agents, financial adviser firm representatives, and banks’ financial services personnel. It is a relatively large number considering our population size. How so?

How Singapore compares to other countries

Let’s look at how we compare to other countries:

If we take the number of practitioners to be 20,000, there are only 259 people to each adviser. This is a far cry from the United States and the United Kingdom, which stand at 1,000 and 3,100 respectively. We have more advisers than Australia, a country that has more than four times our population.

Compared to other professions in Singapore

Let us compare the financial advisory profession with other professions in Singapore. For example, the medical profession. There are 555 people per doctor and 3,400 people per dentist in Singapore. Is there really a need for Singaporeans to visit a financial adviser more often than he or she does a doctor or dentist? I highly doubt it.

To put things further into perspective, there are no age restrictions on the people that a doctor or dentist can see, while a financial planner’s potential clients are typically from the workforce. This reduces the already tiny number from 259 to just 168, since approximately 65 percent of the population is employed.

Ramifications of an excessive number of advisers

While we might expect the large existing number of advisers to mean that the financial needs of Singaporeans are adequately addressed, this is in fact not the case. Reports show that Singaporeans are not financially well served by the financial advisory industry – less than two in 10 Singaporeans are ready to retire, and most Singaporeans are underinsured.

Since there are so many advisers, competition over the solicitation of clients is intense. Is it any wonder that overpriced policies are recommended to maximize revenue from each client? Leaving them underinsured and ill-prepared for retirement also preserves them as viable prospects for future business.

The situation of an adviser having a small number of potential customers is largely the result of an oversupply of advisers. This is a systematic problem that hinders an advisers’ ability to recommend low cost solutions.

Moreover, people have become averse to financial planning due to the poor quality of advice received, coupled with the constant harassment from self-styled planners. Product peddlers have reduced the term “financial planning” to a euphemism for “financial product sales”. Consequently, there is little demand for fee-based, proper financial planning because people think that they have already planned their future solely by purchasing financial products.

What Singapore needs

The industry will not change its spots willingly. Companies will continue to recruit as their sales will grow with the number of salespeople they manage to attract. Until market forces and/or regulators drag the industry screaming and kicking into better shape (if ever), individuals should carefully exercise their own discretion in picking an adviser. Currently, the odds of getting a sound adviser do not look good.